In Part One of this series, I shared information about the federal government’s vigorous response to coronavirus-related fraud. The Department of Justice has allocated $850 million to prioritize fraud investigation and prosecutions across the board – from Paycheck Protection Program (PPP) scams to price-gouging.
The following forms of fraud are currently a top priority for investigation:
- Business owners over-stating payroll, expenses & number of employees (or failing to provide the appropriate documentation thereof)
- Small Business Administration Paycheck Protection Program (PPP) loans greater than $2 million
- Product scams. Individuals or businesses marketing or selling coronavirus testing or treatments that have not been evaluated and approved by the government.
- Phishing scams related to coronavirus. Scams have emerged trying to fool unsuspecting Americans into revealing personal identification and bank account information.
- Fraudulent attempts to sell PPE and other essential supplies to government offices and agencies
- Price-gouging
- Anti-trust violations like price-fixing, bid rigging and market allocation schemes
- Solicitations or crowd-funding for fake charities
- Economic stimulus payment scams and identity theft
- Fraudulent medical billing for procedures related to COVID-19
Previously, I focused on the reasons everyone should take these fraud investigations seriously. In this article, I will explain what you can do to protect yourself (or your business) and how to respond if you are under investigation.
First, I will start with a brief refresher about corporate in-house counsel (and why you may not be able to rely on them for personal representation).
The Role of Corporate In-House Counsel
It is important to remember that general counsel (and in-house counsel) represent an organization, not necessarily its executives. In times of legal trouble, in-house counsel’s role is to preserve and defend the corporation, so the company can continue to operate (ideally without any violations or penalties). This means that corporations facing threats of legal investigation or indictment are highly incentivized to blame executives for wrongdoing, rather than admit systemic failure.
In a way, this can pit corporate interests and an executive’s personal interests against one another – creating considerable tension in times of legal upheaval.
I am not saying this to inspire fear. I just want to explain this frequently misunderstood legal issue and remind executives to remain vigilant (and protect themselves during corporate investigations). In a nutshell, you should not assume that you will be protected simply because you work for a company that has in-house counsel.
That being said, here are some pointers on how to protect yourself during a time of nationwide fraud investigations.
1) Take the Risks Seriously
Government officials are casting a broad net for COVID-19 related fraud. It is important to remember that not everyone investigated for fraud has done something illegal. You could be investigated purely based on the amount of funds you requested from the PPP, the use of the funds or whether you are considered qualified under the need requirement. You may also be subject to more stringent investigations based on the industry you work within (healthcare executives, I’m looking at you).
Federal investigations are obviously not the same as an indictment, but if not handled properly they frequently can lead to an indictment. Because of this, it is imperative to take them seriously. From the second you think you or your business may be under investigation, it is important to contact an experienced white-collar defense attorney. If you hear that other employees are getting visits from federal agents or company documents are getting subpoenaed, you should get professional advice immediately.
Remember the old saying: “a stitch in time saves nine.”
Sometimes during the early stages of an investigation federal agents gather the most damaging evidence. Many times, the matter under investigation is years old. The agents have recently reviewed documents that you haven’t even thought about in a long time. Even well-intentioned statements made in good faith can be incorrect just because of the passage of time. Prosecutors and agents may take your statements out of context and use them against you. It is not unheard of for agents to act friendly, gather seemingly benign statements, then use them against a defendant. When the government stands to lose millions in fraud, agents and prosecutors are encouraged to investigate behavior that is even remotely suspicious.
2) Document Everything
At the heart of most fraud investigations is document examination – for both physical and Electronically Stored Information (ESI) records. In most white collar cases, the investigation revolves around a paper trail (or lack thereof).
For instance, let’s say you are a law-abiding small business owner who has been faithfully paying taxes for decades. Now, through no fault of your own, you are facing the financial struggle of a lifetime. When the government unveiled the PPP, the first round of funding was exhausted within 13 days. Businesses around the country clamored for assistance just to keep afloat and avoid potential bankruptcy (or worse). The problem is, the CARES Act was not specific about what documentation would be required to prove the need for funding, or how to apply for forgiveness in the coming months.
Small business owners, in particular, often are so busy running their business they have trouble keeping accurate records. After all, owners are stretched thin and have to wear many different hats. Record-keeping and documentation often take a backseat to more pressing matters. But when the government comes calling – as they are now – it wants pristine records and the pressure is on. Sadly, there will be many innocent individuals caught up in government COVID-19 fraud investigations purely due to poor record-keeping.
That leads to one of my most important tips: document everything related to a PPP loan! I know it is easier said than done, but desperate times call for desperate measures. Document everything to protect yourself in the event you are subjected to an investigation. We all tend to think the federal government would never be concerned with our small business, but right now they are (more than ever). Fraud investigations related to PPP loans likely will go on for years.
Individuals who fail to keep the appropriate documentation or make inappropriate statements either in person or on social media at a time like this will face a major uphill battle. Americans are subjected to a plethora of negative images right now – from coronavirus related deaths, to personal restrictions, to allegations of serious fraud worldwide. I cannot imagine there will be a single jury pool that has not been negatively predisposed to the news. As PPP fraud investigations continue to ramp up, expect highly negative publicity about them.
So, what does that mean?
That means jurors coming into a courtroom are likely to assume an individual accused of COVID-19 related fraud must be guilty even before there is any evidence presented. There is a high chance they will be influenced by negative public sentiment in general. And when a prosecutor paints a picture of a defendant who engaged in PPP fraud even if the evidence is lacking, there’s a good chance a jury will find that an individual is guilty. It is not an uncommon concept.
Juries, and even judges, are influenced by current events. And negative publicity can poison the minds of people – even inadvertently. Sometimes the nature of charges alone is enough to influence a conviction, and now defendants aren’t just facing the threat of charges but the angst of people who feel crippled and abused by the events surrounding this pandemic. People are angry and scared, and they want someone to blame. Sadly, individuals who have asked the government for PPP funding during their most desperate times might become scapegoats.
3) Contact an Experienced Attorney
If you are in a position where you or your business is already under investigation, the single most important thing you can do is speak with an experienced white-collar defense attorney. Chances are, you have never had to deal with a federal investigation in your life. White-collar attorneys deal with federal investigations every day. The experience they offer could mean the difference between huge fines, jail time, and freedom – which is nothing to take lightly.
If you need assistance responding to a coronavirus fraud-related investigation, contact my office today. I have more than 30 years of white-collar defense experience and have long been recognized for the highest level of professional excellence.